Question

State one point of difference between Cash Credit and Overdraft.

State any difference between cash credit and overdraft.

State one difference between cash credit and overdraft.

Distinguish between:

Cash credit and overdraft.

Distinguish between overdraft and cash credit.

Answer 1

Basis of Distinction	Cash Credit	Overdraft
Purpose:	Businesses primarily use it to meet working capital requirements.	Individuals and corporations typically use it to bridge short-term cash flow shortfalls.
Limit:	A predetermined limit is established depending on the borrower's inventory and receivables.	A limit is established based on the creditworthiness of the account holder and is typically tied to a current account.

Answer 2

	Basis of Distinction	Cash Credit	Overdraft
1.	Eligibility	Persons/organisations not holding current accounts are eligible for cash credit.	Only current account holders are eligible for overdrafts.
2.	Nature	A revolving credit arrangement.	Not a revolving credit arrangement.
3.	Period	A longer period.	For a few days.

Answer 3

Sr. No.	Basis	Overdraft	Cash credit
1.	Purpose	Overdraft is a short term credit facility provided by the banks to their customers to withdraw more than what they have deposited. Account holder is required to repay such amount with interest within the time period stipulated by bank.	Cash credit is an arrangement by which the Bank advances cash loans upto a specified limit to the customers against a bond or other securities.
2.	Account type	Linked to a current account of an organisation.	Requires a separate cash credit account to manage funds and transactions.